A$100m LNG gas supply contract for heavy transport and industry

Trade News

On track for Australia’s first LNG from coal seam gas

Extends a new transport fuel industry to Queensland

Develops network of LNG refuelling stations on east coast

North Ryde, NSW, Australia, 18 March 2010 – BOC and QGC today announced a long-term gas supply agreement worth more than $100 million that puts the companies on track to extend a new transport fuel industry to Queensland and completes an interstate network of liquefied natural gas (LNG) refuelling stations for the trucking industry.

BOC, a member of The Linde Group, and QGC, a BG Group business, announced the contract at a function in Chinchilla, southern Queensland, attended by the Premier of Queensland, the Honourable Anna Bligh MP.

As part of the agreement, QGC will supply BOC with up to 30 petajoules of coal seam gas over 15 years. QGC will supply gas to BOC from July 2011, putting the companies on track to become the first in Australia to produce LNG from coal seam gas, through safe and proven liquefaction technology.

To process the gas into LNG, BOC will build a market-leading micro-LNG plant similar to the one that BOC is now constructing in Westbury, Tasmania. The plant, planned to be built near QGC’s gas fields in the Surat Basin, will produce 50 tonnes of LNG a day – equivalent to 70,000 litres of diesel – for heavy transport and industry.

“This agreement heralds the extension of a new industry to Queensland based on coal seam gas where heavy transport may switch to LNG, an environmentally cleaner fuel than current alternatives,” Ms Bligh said. “LNG produces up to 20 per cent1 less emissions than diesel when used for transport and is a quieter, proven, safe alternative to other fossil fuels. “Through this agreement, Queensland will join with other states as BOC develops an innovative network of LNG refuelling stations along the east coast of Australia for vehicles converted to run on LNG.”

LNG is methane – a natural gas – which when cooled to about -162oC becomes liquefied, taking up 600 times less volume than as a gas. It can then easily be stored in tanks at low pressure and be used as a fuel for heavy transport.

Natural gas is one of the safest transportation fuels and offers a number of critical environmental advantages when compared to competing hydrocarbon fuels, including significantly lower carbon dioxide and other greenhouse gas emissions and cleaner air quality. As a result, the Intergovernmental Panel on Climate Change2 identified gas utilisation as an important short and medium-term technology to help mitigate climate change.

BOC plans to complete an interstate network of liquefied natural gas refuelling stations for the trucking industry, building and operating up to eight refuelling stations from Queensland to Victoria. As a starting point in Queensland, BOC proposes to build a refuelling station on the Warrego Highway, subject to further discussions with its customers.

These stations will be supplied from BOC’s existing liquefaction plant in Victoria and the one to be built in the Surat Basin. The Victorian plant and another under construction in Tasmania are based on the use of conventional gas. The company is seeking to begin construction of the new plant next to QGC’s Condamine Power Station, near Miles, subject to a formal development approval process, early next year. QGC plans to assist in the supply of land and utilities. BOC expects to spend at least $100 million – exclusive of gas – on construction and operation during the lifetime of the project. Up to 40 people will be employed during the construction phase and two full-time employees will be based at the plant on completion.

QGC Managing Director Catherine Tanna said the agreement offered great economic and environmental benefits to Queensland. “This is a leading-edge partnership in which QGC and BOC will use the natural resources of the region’s coal seam gas to extend an attractive new industry to Queensland,” Ms Tanna said. “By supplying coal seam gas to be converted into LNG to replace diesel, we’ll be helping to create a new industry and at the same time support local economies. QGC is committed to supplying the domestic gas market from our gas fields in southern Queensland as we continue to develop our Queensland Curtis LNG Project at Gladstone.”

BOC South Pacific Managing Director Colin Isaac said the agreement marked an important step in the development of LNG, an innovative new fuel, for the transport industry. “Using coal seam gas to create LNG as a transport fuel is an Australian first,” Mr Isaac said. “When construction is complete, this plant will supply a cleaner fuel than diesel with a more stable price. That’s a big win for trucking operators, for the environment and the local economy. LNG is a reliable and proven technology that will offer Queensland’s trucking operators an economically and environmentally appealing alternative to diesel. Importantly, natural gas is a well-accepted fuel, with 10 million3 vehicles worldwide fuelled by natural gas. In Australia, buses operate in Sydney, Brisbane, Adelaide, Perth and Canberra on this fuel. Safety is of paramount concern to both BOC and QGC.”

The liquefied natural gas industry has earned an enviable reputation for safety in half a century of commercial operations. This record is the product of continuous improvement of technology, safety equipment, comprehensive safety procedures, training and equipment maintenance.

1Alternate Fuels Conversion Program Trials (2005-08), sponsored by the Commonwealth Government

BOC is a member of The Linde Group which supplies compressed and bulk gases, chemicals and equipment around the globe. The company develops safe, sustainable and innovative solutions for customers in many specialty sectors, heavy industry and medical environments. For more than a century the company's gases and expertise have contributed to advances in industry and everyday life, including steelmaking, refining, chemical processing, environmental protection, wastewater treatment, welding and cutting, food processing and distribution, glass production, electronics and health care.

The Linde Group is a world leading gases and engineering company with almost 48,000 employees working in more than 100 countries worldwide. In the 2009 financial year it achieved sales of EUR 11.2 billion. The strategy of The Linde Group is geared towards sustainable earnings-based growth and focuses on the expansion of its international business with forward-looking products and services. Linde acts responsibly towards its shareholders, business partners, employees, society and the environment – in every one of its business areas, regions and locations across the globe. Linde is committed to technologies and products that unite the goals of customer value and sustainable development.

QGC Pty Limited (ACN: 089 642 553) is a leading Australian coal seam gas explorer and producer focused on supplying gas to domestic and international markets. QGC is establishing one of Australia’s largest capital infrastructure projects to turn Queensland’s world-class coal seam gas reserves into liquefied natural gas. Queensland Curtis LNG, a priority project for QGC, involves expanding exploration and development in southern and central Queensland and transporting gas through a 540km underground pipeline network to Curtis Island near Gladstone where it will be liquefied.

BG Group plc (LSE: BG.L) is a world leader in natural gas, with a strategy focused on connecting competitively-priced resources to specific, high-value markets. BG Group is active in more than 20 countries on five continents, and has a broad portfolio of exploration and production, liquefied natural gas, transmission and distribution, and power generation businesses. It combines a deep understanding of gas markets with a proven track record in finding and commercialising reserves.

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